It was expected the 2.5 percent fee, created last year, would generate $160 million per year. But in six months, it's raised only about $5 million, according to state Sen. Raymond Lesniak, D-Elizabeth.
"It doesn't work, it hasn't worked and it's not working," Lesniak said. "Two-point-five percent, 10 percent, 20 percent of nothing is nothing."
Lesniak is crafting a bill that would waive the fee, and a state requirement for each municipality to use money generated by the fee to create affordable housing, for one year. The concept has the support of key legislative leaders in addition to the governor.
For more than two decades, the state had let towns pay other towns to fulfill their affordable housing obligation. Last year, the Legislature ended that practice in a shift that affordable housing advocates saw as a major advance.
Instead, money for subsidized housing was to come largely from the 2.5 percent fee charged to developers of commercial property.
Previously, towns had been allowed to set their own fees for developers. Some declined to do so; others charged more than 2.5 percent.
But there's been a big problem: Since the fee was standardized, real estate development has fallen sharply.
Affordable housing advocates don't like the idea of suspending the development fee. They say it's confounding that the state would slow action on providing housing for low- and moderate-income people in a time when there is a growing need for housing.
"We are opposed to a moratorium and don't understand why this is the first thing to be cut," said Kevin Walsh, associate director of the Cherry Hill-based Fair Share Housing Center.
"Holding steady is one thing, but cutting the resources available to help folks with shelter is bad."
Affordable housing has been a contentious issue in the state since the state Supreme Court found in a 1975 ruling in Southern Burlington County NAACP v. Mount Laurel that towns could not use their zoning to exclude the poor. Since then, the court has gone further, finding that towns have an obligation to provide for homes for lower-income people.
To conservatives, the very notion of requiring affordable housing is a prime example of a court meddling in social engineering. Last week, two Republican members of the state Assembly called for a constitutional amendment to eliminate any obligation to provide low-cost housing.
Lesniak said the additional time afforded by a moratorium could help settle the matter. But interest groups have deeply divergent views on affordable housing.
Michael McGuinness, CEO of the state's chapter of the National Association of Industrial and Office Properties, called suspending the fee merely a good start.
"New Jersey needs an affordable housing funding solution that works in any economy," said McGuinness. "The way it was being done isn't really the best way to do it."
Some local officials say a bigger problem than the fee is that another new rule that towns are required to have more affordable housing whenever offices, stores or industrial developments are built. As long as that's the case, towns may be reluctant to allow new commercial development.
"There will be no building of affordable housing, there will be no building of commercial properties," said Randy Brown, the Democratic mayor of Evesham Township who said he killed a proposed shopping center last year because of the affordable housing burden it would have caused.
The plan to suspend the development fee for a year, he said, is "like putting a Band Aid on a whole 20-inch gash."
Housing advocates, however, worry that a one-year suspension of some affordable housing rules could grow longer. And they support the link between how much housing a town must provide and commercial building.
"To us, there's a sensible logic to say that if you're going to build projects where people are working, those workers should be able to live close to where they're working," said Arnold Cohen, policy coordinator at the Housing and Community Development Network of New Jersey.